Redevelopment – Transit Rent paid by the Developer / Builder is not liable to TDS – Section 194(I) of the Income Tax Act, 1961

HELD that the “rent” is clarified in the explanation to Section 194(I) of the Income Tax Act, 1961, to mean any payment by whatever name called, under any lease, sub-lease or any other agreement or arrangement for the use of (either separately or together).

Compensation for displacement in terms of Development Agreement is not “revenue receipt” but “capital receipt” as the property has gone into re-development.   In such scenario, the compensation is normally paid by the building on account of hardship faced by the owner of the flat due to displacement of the occupants of the flat.   The said payment is in the nature of hardship allowance / rehabilitation allowance and is not liable to tax.

Transit Rent is hardship / rehabilitation / displacement allowance paid by the Developer / Landlord to the tenant for dispossession.  The amounts received as compensation for hardship, rehabilitation and for shifting are not liable to tax.

Judgment dated 15.4.2024 in Writ Petition No.4958 of 2024 of Sarfaraz S. Furniturewalla Vs. Afshan Sharfali Ashok Kumar and others